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The claim that shareholders‟ rights to exercise control stem from the ownership of
shares 22 in the company has been subjected to dispute. 23 The rights accrued to
shareholders on the basis that they have the proprietary interests in the company
through ownership of shares though they are not the owners of the company‟s
assets. 24 Gower described the usage of the word „shares‟ as a misnomer since
acquiring them in the company does not entitle shareholders to an interest in the
company‟s assets. 25 However, he emphasised that owning shares in the company
entitled them to become members of the company. 26
Despite changes in the structures of the shareholding in the companies, the law
remains the same; the management are required to ensure that shareholders‟
investments are managed to their advantage. Shareholders are entitled to the benefits
of the increase in value of their investments and through distributions made by the
corporation to control the other company though it does not own any shares in it. Voting trust is the
creation of a group of trustees who have complete powers to vote for all shares placed in the trust
without having them to own the shares. This legal mechanism illustrates the complete separation of
ownership and control envisaged by Berle and Means. Non-voting stock involves arranging rights
attached to different classes of shares and only a very small class or a class representing a very
small investment is allowed to vote. Hence, a small ownership of this privileged class of shares is
sufficient to control the company. See ibid, at 69-75.
21 The shares in the company are widely dispersed so that none of the shareholders own a majority in
the company. In order to acquire control over the company, a shareholder must be able to attract
various owners to garner sufficient majority votes at the general meeting.
22 John Farrar Corporate Governance Theories, Principles and Practice (3rd ed., Oxford University
Press, South Melbourne, 2008) at 305 [“Corporate Governance”].
23 Paddy Ireland Company Law and the Myth of Shareholder Ownership [1999] 62 MLR 32.
24 This assertion is based on the historical reason where the early joint stock companies were viewed as
a partnership where partners are also owners of the property. However, after the corporate
personality principle was adopted, the company now owns the property and not the shareholders -
see Macaura v Northern Assurance Co Ltd [1925] AC 619.
25 Paul L. Davies Gower and Davies‟ Principles of Modern Company Law (8 th ed., Sweet & Maxwell,
London, 2008) at [23-2].
26 Ibid.
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